Keeping A Close Watch

Top Brand Execs Monitor Political Developments But Remain Decidedly Positive

Several leading brand executives kicked off the 40th Annual New York University International Hospitality Industry Investment Conference earlier this week by weighing in on a host of critical industry issues, such as growing international trade tensions, potential U.S. immigration reform, the profound impact of loyalty programs and brand building strategies.

The brand executives provided a decidedly positive outlook in a session entitled “The CEOs Check-In: A View From The Top,” as well as later in a media briefing, despite some of the political headwinds.

Christopher Nassetta, President and CEO, Hilton, commented on the growing tension between the U.S. and some of its foreign trade partners. “Ultimately, I think the impact for our business is whatever impact it has on the broader economy, certainly here in the U.S. and for that matter around the world. One thing we know about our business broadly is that we’re very highly correlated to growth in GDP if you look at economies around the world. It’s early days in terms of what’s happening with this trade dialogue. We’re hopeful that calm heads will prevail in the end and deals will get done, but we’re watching it carefully,” he said.

The topic of immigration, meanwhile, has been a very much a hot button issue for some time for both the lodging industry and the country in general. Jim Murren, Chairman and CEO of MGM Resorts, underscored the importance of the issue for Las Vegas as well as for the company as the largest employer in the state of Nevada.

“I’m very troubled by the fact that we are where we are and have been there for so long, but we’re going to continue to fight for what we believe is right, including immigration reform. There’s no doubt that we all want to protect our borders, but we also have to view this very humanely. It’s very frustrating that nothing seems to get done in Washington D.C. If this was an issue that we were to tackle [as CEOs] we would look at it very transparently, we’d make tough decisions and we would implement them. We wouldn’t push the ball down the field as so often is the case,” he said.

Nassetta added, “It is sad as close as we’ve been able to get in the Bush administration and Obama administration that we haven’t had comprehensive immigration reform. Certainly our industry has been a huge advocate. Not only is it something that we need ultimately to be able to do to do what we do to serve customers, but it would be great for our country. Sadly immigration has become a political football and to some degree a political fundraiser. I’m an optimistic sort so I do believe in our future, and hopefully in the not-too-distant future, there is room for immigration reform on a broad basis,” he stated.
Continuing on the international front, the executives were asked about the vast potential of China, specifically with an estimated 420 million outbound travelers, and the importance of capturing those visitors.

According to Nassetta, creating loyalty among the Chinese guests is going to be critical. “Every time I go it’s different and every time I’m overwhelmed. I’m overwhelmed by how that economy is growing; I’m overwhelmed by how entrepreneurial the Chinese people are; and I’m overwhelmed by how much they want to have life experiences, which is driving ultimately a massive amount of travel inside of China and these 400 million that will be outbound travelers. By the way, it’s really happening these aren’t pie-in-the-sky numbers. So I think for all of us it’s about building a network effect in China,” he said.

Closer to home, Arne Sorenson, President and CEO, Marriott International, underscored the importance of loyalty programs by pointing out that Hilton and Marriott have nearly 60 percent of their business coming from existing customers in their respective loyalty programs.

“That is a stunning statistic. We get comfortable with it because we say it so often, but when you’re driving the majority of your business from your own community of customers that is a hallmark that we can continue to use and we can continue to build on that as we go forward. But let’s not lose sight of the fact that customers are looking for value…We’ve got to do a better job of that,” he said.

Consolidation has been prevalent throughout the industry with a number of large brand companies continuing to add brands to their portfolios through acquisition.

Sebastien Bazin, Chairman and CEO, AccorHotels, weighed in on why more brands are better as he hinted at some future growth for the global company. “Some brands are meant to be global and some brands are meant to be regional. Accor has 26 brands and we had 13 when I started. In all honestly within five years Accor will have 40 brands, some of them being regional and some being local,” he said.

Bazin continued, “If you’re disciplined then each brand is not redundant of one another, but rather to fill the gap. My clients what they want is to have an Accor they consistently use to find what they need when they want to travel. It could be home sharing, it could be a restaurant, it could be a concierge or it could be a hotel. I want to make sure I can be of service to retain that same client. It’s all a matter of retention and touch points,” he said.

Nassetta went on to provide a glimpse into Hilton’s strategy as it relates to brand building. “We’ve been pretty well chronicled on what our approach has been and that has been very organically focused…Every time that we’ve looked at opportunities to grow inorganically we’ve made the judgment that it doesn’t fit strategically because we’re better off developing a new brand that is exactly what our customer wants instead of tinkering and fixing inevitably the problems that other people have created. Obviously, from the standpoint of returns every time we launch a brand it’s nearly an infinite return so it’s sort of hard to debate the returns aren’t higher so that’s why we’ve pursed that path,” he concluded.